salt and your financials
6/21/2016
SALT PURCHASING & INVENTORTY MANAGEMENT 19th Annual Symposium Presented By: Jim Hornung Jr., CSP and Diana Clonch
19th Annual Snow & Ice Symposium June 22-24, 2016 | Providence, RI
Agenda • •
• • •
Salt and Financials –Understanding Usage Distribution and Logistics –Salt Facts –Supplies –Transportation Best Practices Liquids & Bagged Material Storage
1
6/21/2016
Jim Hornung Jr, CSP
SALT AND YOUR FINANCIALS
Salt and your financial statements 1. How you purchase, account and pay for salt all have major effects on your Profit & Loss Statement and Balance Sheet 2. Is it an asset or a liability? (depends on your stage of the process & point of view) 3. To the best of your ability align your salt billing type & timing to how you purchase & pay for salt.
2
6/21/2016
Salt & your bank 1. Because salt is a commodity its prices vary and that can wreak havoc on your liquidity and bottom line. In economics, a commodity is a marketable item produced to satisfy wants or needs 2. How does your bank view salt? (hint: Likely they view it differently in November than in June.)
Salt & your bank 1. Cash or credit? There is not one right answer from company to company or year to year but the effects are significant. 2. Do you know your cost of money? What does that mean and why is it important. 3. Understand you credit utilization and how using a line of credit to purchase salt may impact your ability to cover day-to-day expenses.
3
6/21/2016
Analyzing Accounts 1. In order to properly forecast salt usage you need to be able to analyze each sites salt needs & requirements. 2. For most contractors salt application vary by type of property & contract specifications. 3. Understanding what is required will allow you to forecast more accurately and help avoid situations where salt is applied improperly leading to liability issues.
Pounds per acre 1. There is not one simple pounds/acre calculation that can be applied across the board. Variables to consider (we all know them) –Type of property (zero tolerance, low end, etc…) –Temperature –Type of pavement –Moisture content
4
6/21/2016
Know your numbers 1. While often it is not prudent to price based on acreage it is imperative that you know your total acreage for salt forecasting. 2. Do you have a standard re-order point? Do you know how to calculate it? Does it Factor weekends, holidays and storms? 3. Do you have a secondary vendor that you can access?
Calculating usage over time
5
6/21/2016
Questions?
Diana Clonch
DISTRIBUTION & LOGISTICS
6
6/21/2016
Distribution and Logistics 1. Alternative sources for rock salt due to limited product availability: –Non-traditional suppliers –Brokers –Foreign supplies 2. To grow our understanding of what has taken place, let’s take a look at a few of the logistics associated with salt supplies…
Salt facts 1. Produced in one of three technologies in North America – Shaft Mining – typical for rock salt production…high cost associated with the mining operation and further compounded by transportation logistics – Solution Mining - Evaporation or vacuum pan - where water is pumped underground dissolving the solid salt and then pumping out the salty brine which is de-watered to crystallize the salt (typical of salt as produced use by the chemical companies) – Solar Salt or sea salt - extracts salt from oceans and saline lakes
2. Foreign supplies – Can take advantage of surface mining – much less expensive process
7
6/21/2016
Shaft Mining
Source: Britannica Encyclopedia
8
6/21/2016
Source: Morton Salt
Source: Atacama Salt
9
6/21/2016
Supplies 1. Domestic production – Averages about 76% of all salt used in the US – 61 plants in 16 states – Average about 42.4 million tons per year – 2014 = 44.5 million (5% increase)
2. Foreign salt – Averages about 24% of all salt used – Average import 13.3 million tons per year – 2014 =18 million (35% increase) – Largest importers are Canada (38%) and Chile (36%)
10
6/21/2016
Salt Use Stats 1. Total Salt Use in the US – Averages 55.6 million tons – 2014 = 62.5 million (12.5% increase in use) – 2014 = 29% of all salt used was imported (average is 24%)
2. Highway Use – Averages 38% of all salt used – 2014 was 42% of all used
Logistics •
Transport logistics – Transportation is a major cost associated with unit price – Barges, rail, trucking – Competition among commodities….other commodities tend to pay higher prices for transport – There is limited availability of transportation vessels – Unit cost can vary depending upon buyer’s proximity to mine and/or port
11
6/21/2016
Quality Domestic • Varies depending upon final use for domestic salt…rock salt for highway use will typically go through a gradation process and quality assurance to produce a product in size and consistency as specified ….typically ASTM specification for course graded rock salt: • Minimum of 95% chlorides • Maximum of 2% moisture content • Gradation at a less than ½” in size …. the majority ranging from 1/10” to 3/8” in size
ASTM – American Society for Testing and Materials …. standards organization
Quality Foreign • Largest importer to US is Canada followed by Chile (38% and 36% respectively) • Depending upon source may or may not adhere to ASTM specifications • Chilean salt is surfaced mined at a fraction of the cost of deep mining • End product available in both bulk and bagged • General concerns of bulk foreign salt end users typically deal with a higher amount of fines and increased debris
12
6/21/2016
Best Practices • Store one year’s average use • Typical goal for government agencies
• Buy early in the season and purchase as much as can be stored • Establish multiple vendors • Excellent strategy to securing product • Seek out reliable sources
• Review and revise contracts where possible: • Price increase and product availability clauses • Prepaid salt purchases • Alternative treatment types
• Keep clients informed
Salt Purchasing Variables • • • • •
Storage space Proximity to supply Type of winter/demand Logistics Cash flow/billing methods – Aligning purchasing and billing for materials (15/15 example) – Pre-billing for materials
13
6/21/2016
Jim Hornung Jr and Diana Clonch
LIQUIDS & BAGGED PRODUCT
Bagged Ice Melter 1. How and where do you store it? 2. One supplier or multiple? 3. Knowing how to factor the hidden cost of transportation between locations. Most average sites will not dictate whole truck load deliveries or in many cases onsite storage. The labor burn for transport can be a major hidden cost.
14
6/21/2016
Liquids • •
•
•
Typically used for pre-wetting solids (as discharged) or to pre-treat stock pile (agriculture products only). Used also for anti-icing (direct application to the surface ahead of the storm or event). Specific application rates will vary for specific product, weather and environmental variables (surface temperature, precipitation type, moisture, traffic, end goals). Allows for a reduction of dry material of 20% or more.
Considerations for liquids User buy-in – Client acceptance – Employee training
Production versus purchasing – Brine production system • Salt supply, water supply, storage, local regulations, direct and indirect costs – Purchasing • Available vendors • Local providers • Natural brines • Storage
Product availability – Local availability – Delivery costs – Peak season availability
15
6/21/2016
Considerations for liquids •
Product specifications – Specification sheets for product content – Sampling for product consistency
• • •
Treatment Methods Application Storage – Size and number of tanks – Tank durability – Tank placement location – Local regulations (secondary containment)
Storage
Solid
Liquid
Liquid
16
6/21/2016
Solids Material Storage
Under cover Impermeable pad
17
6/21/2016
Liquid Storage
Liquids……..
18
6/21/2016
Storage Tank Failures…
19
6/21/2016
Summary • Salt and Financials – Understanding Usage
• Distribution and Logistics – Salt Facts – Supplies – Transportation
• Best Practices • Liquids & Bagged • Material Storage
Questions?
20
6/21/2016
References 1. Salt Institute 2. US Geological Survey 3. Rock Salt Sourcing: Summary and Recommendations Choderer Consultants, Inc. March 17, 2014
21
SALT PURCHASING & INVENTORTY MANAGEMENT 19th Annual Symposium Presented By: Jim Hornung Jr., CSP and Diana Clonch
19th Annual Snow & Ice Symposium June 22-24, 2016 | Providence, RI
Agenda • •
• • •
Salt and Financials –Understanding Usage Distribution and Logistics –Salt Facts –Supplies –Transportation Best Practices Liquids & Bagged Material Storage
1
6/21/2016
Jim Hornung Jr, CSP
SALT AND YOUR FINANCIALS
Salt and your financial statements 1. How you purchase, account and pay for salt all have major effects on your Profit & Loss Statement and Balance Sheet 2. Is it an asset or a liability? (depends on your stage of the process & point of view) 3. To the best of your ability align your salt billing type & timing to how you purchase & pay for salt.
2
6/21/2016
Salt & your bank 1. Because salt is a commodity its prices vary and that can wreak havoc on your liquidity and bottom line. In economics, a commodity is a marketable item produced to satisfy wants or needs 2. How does your bank view salt? (hint: Likely they view it differently in November than in June.)
Salt & your bank 1. Cash or credit? There is not one right answer from company to company or year to year but the effects are significant. 2. Do you know your cost of money? What does that mean and why is it important. 3. Understand you credit utilization and how using a line of credit to purchase salt may impact your ability to cover day-to-day expenses.
3
6/21/2016
Analyzing Accounts 1. In order to properly forecast salt usage you need to be able to analyze each sites salt needs & requirements. 2. For most contractors salt application vary by type of property & contract specifications. 3. Understanding what is required will allow you to forecast more accurately and help avoid situations where salt is applied improperly leading to liability issues.
Pounds per acre 1. There is not one simple pounds/acre calculation that can be applied across the board. Variables to consider (we all know them) –Type of property (zero tolerance, low end, etc…) –Temperature –Type of pavement –Moisture content
4
6/21/2016
Know your numbers 1. While often it is not prudent to price based on acreage it is imperative that you know your total acreage for salt forecasting. 2. Do you have a standard re-order point? Do you know how to calculate it? Does it Factor weekends, holidays and storms? 3. Do you have a secondary vendor that you can access?
Calculating usage over time
5
6/21/2016
Questions?
Diana Clonch
DISTRIBUTION & LOGISTICS
6
6/21/2016
Distribution and Logistics 1. Alternative sources for rock salt due to limited product availability: –Non-traditional suppliers –Brokers –Foreign supplies 2. To grow our understanding of what has taken place, let’s take a look at a few of the logistics associated with salt supplies…
Salt facts 1. Produced in one of three technologies in North America – Shaft Mining – typical for rock salt production…high cost associated with the mining operation and further compounded by transportation logistics – Solution Mining - Evaporation or vacuum pan - where water is pumped underground dissolving the solid salt and then pumping out the salty brine which is de-watered to crystallize the salt (typical of salt as produced use by the chemical companies) – Solar Salt or sea salt - extracts salt from oceans and saline lakes
2. Foreign supplies – Can take advantage of surface mining – much less expensive process
7
6/21/2016
Shaft Mining
Source: Britannica Encyclopedia
8
6/21/2016
Source: Morton Salt
Source: Atacama Salt
9
6/21/2016
Supplies 1. Domestic production – Averages about 76% of all salt used in the US – 61 plants in 16 states – Average about 42.4 million tons per year – 2014 = 44.5 million (5% increase)
2. Foreign salt – Averages about 24% of all salt used – Average import 13.3 million tons per year – 2014 =18 million (35% increase) – Largest importers are Canada (38%) and Chile (36%)
10
6/21/2016
Salt Use Stats 1. Total Salt Use in the US – Averages 55.6 million tons – 2014 = 62.5 million (12.5% increase in use) – 2014 = 29% of all salt used was imported (average is 24%)
2. Highway Use – Averages 38% of all salt used – 2014 was 42% of all used
Logistics •
Transport logistics – Transportation is a major cost associated with unit price – Barges, rail, trucking – Competition among commodities….other commodities tend to pay higher prices for transport – There is limited availability of transportation vessels – Unit cost can vary depending upon buyer’s proximity to mine and/or port
11
6/21/2016
Quality Domestic • Varies depending upon final use for domestic salt…rock salt for highway use will typically go through a gradation process and quality assurance to produce a product in size and consistency as specified ….typically ASTM specification for course graded rock salt: • Minimum of 95% chlorides • Maximum of 2% moisture content • Gradation at a less than ½” in size …. the majority ranging from 1/10” to 3/8” in size
ASTM – American Society for Testing and Materials …. standards organization
Quality Foreign • Largest importer to US is Canada followed by Chile (38% and 36% respectively) • Depending upon source may or may not adhere to ASTM specifications • Chilean salt is surfaced mined at a fraction of the cost of deep mining • End product available in both bulk and bagged • General concerns of bulk foreign salt end users typically deal with a higher amount of fines and increased debris
12
6/21/2016
Best Practices • Store one year’s average use • Typical goal for government agencies
• Buy early in the season and purchase as much as can be stored • Establish multiple vendors • Excellent strategy to securing product • Seek out reliable sources
• Review and revise contracts where possible: • Price increase and product availability clauses • Prepaid salt purchases • Alternative treatment types
• Keep clients informed
Salt Purchasing Variables • • • • •
Storage space Proximity to supply Type of winter/demand Logistics Cash flow/billing methods – Aligning purchasing and billing for materials (15/15 example) – Pre-billing for materials
13
6/21/2016
Jim Hornung Jr and Diana Clonch
LIQUIDS & BAGGED PRODUCT
Bagged Ice Melter 1. How and where do you store it? 2. One supplier or multiple? 3. Knowing how to factor the hidden cost of transportation between locations. Most average sites will not dictate whole truck load deliveries or in many cases onsite storage. The labor burn for transport can be a major hidden cost.
14
6/21/2016
Liquids • •
•
•
Typically used for pre-wetting solids (as discharged) or to pre-treat stock pile (agriculture products only). Used also for anti-icing (direct application to the surface ahead of the storm or event). Specific application rates will vary for specific product, weather and environmental variables (surface temperature, precipitation type, moisture, traffic, end goals). Allows for a reduction of dry material of 20% or more.
Considerations for liquids User buy-in – Client acceptance – Employee training
Production versus purchasing – Brine production system • Salt supply, water supply, storage, local regulations, direct and indirect costs – Purchasing • Available vendors • Local providers • Natural brines • Storage
Product availability – Local availability – Delivery costs – Peak season availability
15
6/21/2016
Considerations for liquids •
Product specifications – Specification sheets for product content – Sampling for product consistency
• • •
Treatment Methods Application Storage – Size and number of tanks – Tank durability – Tank placement location – Local regulations (secondary containment)
Storage
Solid
Liquid
Liquid
16
6/21/2016
Solids Material Storage
Under cover Impermeable pad
17
6/21/2016
Liquid Storage
Liquids……..
18
6/21/2016
Storage Tank Failures…
19
6/21/2016
Summary • Salt and Financials – Understanding Usage
• Distribution and Logistics – Salt Facts – Supplies – Transportation
• Best Practices • Liquids & Bagged • Material Storage
Questions?
20
6/21/2016
References 1. Salt Institute 2. US Geological Survey 3. Rock Salt Sourcing: Summary and Recommendations Choderer Consultants, Inc. March 17, 2014
21
